[Market Madness] Edition 0064
Fed Battles Back
What I missed yesterday…
Shame on me, I missed the big take from Mr. Powell at the Fed yesterday. While talking with a Senate committee yesterday, Mr. Powell signaled that the Fed will begin to purchase individual corporate bonds in excess of $250 billion. This helped fuel the rebound in the U.S. we saw yesterday while heading toward the close. Read more on that here.
Today is a new day, one where we started off strong, carrying momentum from yesterday in tandem with the announcement of a plan to release a $1 trillion infrastructure plan from the White House. This helped give the overnight futures a bump and start the day off green.
We got some bad news coming from Beijing as they close down their city schools due to another rise in COVID 19 cases. Some U.S. states that reopened early are also seeing higher surges, leading to worries of another nationwide lock down scenario.
To counteract the bad news, today’s piece focuses on the shockingly positive retail sales news that broke today, suggesting that economic recovery is not just a dream after all. The market’s maintained their green status all day, with some retraction off the day’s high points before the close.
Did you miss yesterdays’s piece? No worries! Get it right here and catch up on the madness.
Fundamentals
Tuesday Close:
Dow Jones Industrial Avg: +2.04%
S&P 500: +1.90%
NASDAQ: +1.75%
US 10 YR: 0.750% | 98 8 / 32
Crude OIL: $38.12
Market Madness Portfolio: +1.41%
COVID 19 Global Cases: 8,203,463
Indices Overseas:
FTSE 100: +2.94%
Nikkei: +4.88%
Hang Seng: +2.39%
Retail records
The month of May was a good one for retailers hurt during COVID 19 lock downs. The rise in month-over-month retail sales rose a record 17.7%, doubling the analyst expectations of around 8%. This is a much needed boost to spirits regarding the economy. A great deal of speculation has been made the past few months about how consumers’ spending habits would change due to the extended period of closures. The large jump we saw shows that consumers are still interested in opening up their wallets for goods and services. Some of this spending could be attributed to the vast amount of home repair, cleaning, and redecoration that many Americans resorted to in order to pass their time in quarantine.
A lot of home redecorating and cleaning calls for replacing old items with new ones; this could be anything from a fresh coat of paint to new furniture (which jumped almost 90% month-over month). Going back outside also requires pants, and since many work-at-home setups allowed for business on top and PJs on the bottom, we’ve been able to delay purchasing a good fitting pair of jeans for too long now.
As with everything lately, your mileage may vary. In this case, every industry in retail is experiencing different levels of sales. Some, like clothing and furniture, saw huge boosts in month-over-month sales, and other sectors are not as fortunate. Positive increases are always good, but we just have to be patient for some sectors that are still getting their sea legs back. Once we return to seasonal yearly averages across the majority of sectors and industries, the economy will have the green light to go full steam ahead.
For now, as Mr. Powell has been telling us, we need some more support from them and the government before we can start running again. I think there is also an expectation by the government that many businesses will be prepped and ready to reopen once the extended unemployment benefits expire on July 31. Many employees are most likely also hoping that they don’t get the call back before then, since many Americans are realizing greater income benefits from the heightened unemployment than from their normal 9-to-5, creating feelings of dread for returning to work. As we say in economics, “there’s no such thing as free lunch,” and we will be repaying the government stimulus and unemployment benefits for a long time into the future.
Quick Takes
Highlights from Mr. Powell’s conference call today with a Senate Banking Committee. (via CNBC)
Beijing closes city schools amid second COVID 19 outbreak. Travel curbs are being set in place as well to mitigate further spread. (via ATOM+, headline only)*
U.S. aiming to be able to distribute 300 million COVID 19 vaccines by January, 2021. (via ATOM+, headline only)*
Retail sales in the U.S. rose a record 18% in May. (via WSJ)
Texas and Florida seeing surges in hospitalizations and new cases, respectively. (via Yahoo! Finance and Bloomberg)
20 Indian soldiers killed in skirmish with Chinese forces along shared border in Himalayan Mountains. (via WSJ)
North Korea blows up joint liaison office in the DMZ after multiple threats. (via Business Insider)
Fed Chairman Powell says there will be significant uncertainty on timing and strength of U.S. recovery. Also, he says direct support from Congress can make a difference in that timing. (via ATOM+, headline only)*
Dexamethasone being touted as major development in treating COVID 19, according to scientists. (via CNBC)
U.S. Open will go on, but without fans. (via CNBC)
*ATOM+ provides account holders with a feed of news articles and headlines across all major business reporting sites as well as government committee meeting notes, economic data releases, links to analyst reports and recommendations and company press reports. ATOM staff also produces internally written market commentaries three times per day.
Reader’s Corner
The reader is thankful for the feedback on yesterday’s interview regarding the PPP loans. Mike and I hope it was helpful, and hope that the readers will share with anyone who might want to know more about the program. Mike has graciously offered his assistance in answering other follow-up questions readers or friends of readers may have.
Behind the Madness
Thank you again for checking in.
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